Chrysler invites IPO pitches, leaves door open to Fiat buyout

NEW YORK/LONDON, March 7 U.S. carmaker Chrysler
has asked banks to pitch next month for a mandate to run a
potential public listing of its shares, four sources said, as
parent Fiat wrangles with minority shareholder VEBA
over a possible buyout.

Chrysler will interview investment banks in April for a
underwriting role in a proposed initial public offering (IPO),
sources familiar with the matter told Reuters on Thursday.

Three of the sources said bankers had been asked to prepare
a "dual-track" sale leading either to the flotation of Chrysler
shares owned by a United Auto Workers union retiree healthcare
trust, VEBA, or an agreed buyout of its stake by Fiat.

A Chrysler Group spokesman said he had not heard of an April
meeting of bankers for an IPO.

Fiat declined to comment.

Fiat owns 58.5 percent of Chrysler, while the other 41.5
percent is owned by VEBA.

Sergio Marchionne, chief executive of both Fiat and
Chrysler, has long wanted to merge the two but has said he would
be open to an IPO if Fiat and VEBA could not reach a deal.

Fiat has options to buy blocks of shares from VEBA, but its
attempts to exercise them has been contested in court over their
valuation. An IPO pitching process could provide a way of
independently valuing the company and settling the argument.

Fiat has no intention of reducing its ownership, said the
sources, who asked not to be identified because the discussions
are private.

Marchionne said earlier this week that he expected to reach
a deal with VEBA and avert a public listing.

One banking source said talks were also starting on how Fiat
would finance any future takeover of Chrysler.

Under a deal struck in 2009, when Fiat rescued Chrysler from
bankruptcy, the Italian carmaker has options to purchase up to
16.6 percent from VEBA at a price set by an agreed formula. But
the two sides have been arguing about the arithmetic for months.

Fiat filed last July to buy the first 3.3 percent for $139.7
million, but VEBA said the transaction value was $342 million,
and the issue has been in court ever since.

In January, VEBA said it would exercise a separate
entitlement to sell Chrysler shares in an IPO, formally asking
the company to register with the U.S. Securities and Exchange
Commission for a 16.6 percent issue.

Fiat has valued at Chrysler at $4.2 billion in court
filings, way below VEBA's $10.3 billion figure. UBS put the U.S.
carmaker's worth at around $9 billion in November.

The listing process launched by Chrysler may provide more
clarity on how Wall Street values the company, people involved
in the preparations said.

"The upside could be that there's a clear market price for
Chrysler, and no more haggling about prices as Fiat moves to
bring it under complete control," said one, adding that a
tentative IPO window had been set for the third quarter.